The Treasury declined to give estimates of how many jobs would be lost.

Insiders insisted that the overall impact on employment would be positive as economic confidence rose.

"At the end of this process we will have a stronger economy," the Chancellor said.

John Philpott, the chief economist at the Chartered Institute of Personnel and Development, estimated that the cuts would reduce overall public sector employment by 50,000 during this financial year. He also warned of "knock-on effects" on the private sector, affecting companies doing contract work for public bodies.

Prof Colin Talbot, of Manchester Business School, said the total number of jobs lost could be close to 100,000.

He estimated that 45,000 jobs would be cut among consultants, contractors and government suppliers.

Another 40,000 would go in local councils and devolved administrations, and 10,000 from quangos, as well as 2,400 from a freeze on civil service recruitment, he said.

Vince Cable, the Business Secretary, told Radio Four last night that there was "bound to be some impact on employment".

The Government is expected to spend about £700 billion this year, about £150 billion more than it raises in taxes.

Mr Laws said bigger cuts would come later this year when ministers outlined their annual departmental budgets from next April.

"This is only the first step on what will be a long road to restoring good management of our public finances," he said. "Even tougher decisions undoubtedly await us."